DeborahLevine

NEW YORK (MarketWatch) -- Treasury prices soared on Thursday, at one point pushing yields on 10-year notes down by the most since September 2008, matching a deep plunge in U.S. stocks and as riots in Greece fanned worries that European countries would have trouble bringing down deficits.

The yields on 10-year notes
TMUBMUSD10Y, +0.00%
lost 16 basis points to 3.38%, the lowest level since mid-December. Yields move inversely to prices and a basis point is 0.01%.

As equities dropped as much as 8%, 10-year yields fell by the most since at least September 2008 before recovering some ground.

Thirty-year bond yields
TMUBMUSD30Y, +0.00%
also fell the most in 14 months, down 21 basis points to 4.18%.

Yields on 1-month bills
TMUBMUSD01M, +0.00%
-- as one of the shortest-dated securities, a favorite when investors seek safety -- fell as low as 0.05%.

Benchmark U.S. stock indexes plunged and then recovered most of the losses, ending down about 3.2%, leading to questions of whether technical issues or human mistakes were part of the cause. Read about U.S. stock markets.

"This move feels reminiscent of the 2008 Lehman meltdown trade," said Thomas di Galoma, head of U.S. fixed-income-rates trading. "In my 25 years in the business, I have never seen bonds have that type of move in a 20 minute period."

The euro plunged to a fresh 14-month low versus the dollar, giving investors a lot of cash to invest -- some of which went into Treasurys, the standard asset of choice in times of turmoil. See more on dollar, Greece.

Bonds rallied from earlier in the day after European Central Bank President Jean-Claude Trichet said the bank's governing council didn't discuss buying government bonds.

Trichet's press conference, coming in the wake of the turmoil in Greek, Spanish and Portuguese debt markets, disappointed those hoping for any word of solutions the central bank had to offer to soothe nerves in the market.

U.S. data

A pair of U.S. economic reports issued Thursday were "generally friendly" but represented a "side show to the big show of the ECB," said CRT Capital Group.

Productivity of U.S. nonfarm businesses slowed in the first quarter, Labor Department data showed, but unit labor costs fell 1.6% -- a sign that disinflationary pressures remain strong. See more on productivity.

Separately, the Labor Department said that the number of first-time claimants filing for jobless benefits fell moderately last week, down by 7,000 to a seasonally adjusted 444,000, but that continuing claims rose.

This suggests companies aren't firing employees as fast, but finding a new job remains extremely difficult. Read about jobless claims.

"The Fed has to be comforted by the productivity gains and low implied inflation figures," the CRT Capital strategists said. The rise in the ranks of people remaining on emergency or extended benefits suggests "claims are stabilizing more or less around these levels," they pointed out.

Yields had been slightly higher before Trichet's remarks and U.S. economic data, which traders attributed to a reversal after an extreme move in recent days. Also, few are willing to make a big push into Treasurys a day before the government's closely followed nonfarm payrolls report for April.

"Portfolio managers are making adjustments following the 50-basis-point rally that took place over the last several weeks," said Richard Bryant, head of Treasury trading at MF Global Holdings.

Yields on the benchmark securities had touched the 4% mark at the beginning of April.

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